Evelo Biosciences(EVLO) - 2023 Q1 - Quarterly Report

Financial Position - As of March 31, 2023, Evelo Biosciences had cash and cash equivalents of $27.5 million, down from $47.9 million as of December 31, 2022, representing a decrease of 42.6%[22] - Total current liabilities increased significantly to $57.2 million as of March 31, 2023, compared to $12.4 million as of December 31, 2022, indicating a rise of 361.5%[22] - Evelo reported a total stockholders' deficit of $27.4 million as of March 31, 2023, compared to a deficit of $5.0 million as of December 31, 2022[22] - As of March 31, 2023, cash and cash equivalents totaled $27.472 million, a decrease of 30.6% from $39.631 million as of March 31, 2022[51] - The company has an accumulated deficit of $554.6 million as of March 31, 2023, highlighting ongoing financial challenges[176] - As of March 31, 2023, total debt was $43.774 million, with minimum future loan payments totaling $45.0 million[70] - The company has received gross proceeds of $520.1 million since inception, including $45.0 million borrowed under debt facilities[132] - The company has $69.1 million remaining available to be sold under an "at-the-market" offering sales agreement as of March 31, 2023[151] Operating Performance - The net loss for the three months ended March 31, 2023, was $25.3 million, a decrease of 15.8% compared to a net loss of $29.9 million for the same period in 2022[24] - The total operating expenses for Q1 2023 were $24.9 million, a reduction of 13.3% from $28.7 million in Q1 2022[24] - The company incurred net cash used in operating activities of $20.3 million for Q1 2023, a decrease from $28.9 million in Q1 2022[30] - General and administrative (G&A) expenses for Q1 2023 were $7.0 million, down $2.4 million from $9.4 million in Q1 2022[129] - Stock-based compensation expense for the three months ended March 31, 2023, was $2.909 million, down from $4.275 million in the same period in 2022[85] Research and Development - Research and development expenses for Q1 2023 were $17.9 million, down 7.5% from $19.3 million in Q1 2022[24] - The company has incurred significant R&D expenses primarily for the development of product candidates, with costs recognized based on progress evaluations[115] - R&D expenses for inflammation programs increased by $1.4 million to $8.4 million in Q1 2023, driven by the EDP2939 program and EDP1815 Phase 2 trial[128] - EDP1815, a first-generation product candidate, showed a PASI-50 response rate of 29% compared to 12% for placebo in a Phase 2 trial, with statistical significance (p=0.027)[107] - EDP2939, a second-generation product candidate, is currently in a Phase 1/2 trial, with topline results expected in early Q4 2023[104] Going Concern and Financial Challenges - Management expressed substantial doubt about the company's ability to continue as a going concern within one year due to insufficient cash resources as of March 31, 2023[35] - The company has identified conditions that raise substantial doubt about its ability to continue as a going concern without securing additional financing[176] - The company faces substantial doubt about its ability to continue as a going concern within one year after the filing of its Quarterly Report due to insufficient cash resources[138] - Future defaults under the Loan Agreement could lead to immediate repayment demands, significantly harming the company's business and financial prospects[182] - The company is exploring changes to its capital structure to increase cash runway and maintain liquidity amid ongoing financial difficulties[159] Workforce and Cost Management - In January 2023, the company approved a workforce reduction plan affecting 48 employees, approximately 45% of total headcount, resulting in $2.7 million in charges for the three months ended March 31, 2023[92] - The company reduced its workforce by 48 employees, approximately 45% of its headcount, to preserve cash and prioritize core clinical programs[133] Regulatory and Market Risks - The company has not yet demonstrated the ability to successfully complete pivotal clinical trials or obtain regulatory approvals for its product candidates[189] - The company’s product candidates are based on an unproven therapeutic approach targeting the small intestinal axis, with no prior regulatory approvals for similar therapies[200] - Market volatility and rising interest rates may adversely impact the company's ability to access capital when needed[186] - The FDA may require more complex clinical trials than anticipated, increasing development costs and delaying commercialization[214] - Conducting clinical trials in foreign countries presents additional risks that may delay completion[219] Future Outlook - The company anticipates significant increases in research and development and general and administrative expenses, necessitating additional capital to fund operations[136] - The company expects expenses to increase as it conducts clinical trials and expands manufacturing capacity[185] - The company may need to pursue strategic partnerships, licensing arrangements, and collaborations to secure additional funding[134]